In this document, we looked at the differences between the New Income Tax Regime and how our old Income Tax Regime. How is it useful for employees. There is a clear difference in using these regimes. Employees are allowed to use any of these. #hrexpert #hrservices #labourlaws #payrollmanagement #hrbusinesspartner #eor #peo #hrsupport #hrtechnology #hrconsulting #gigworkers #careerstargroup #smebusiness #hr #hrconsultancy #hrtech #hroutsourcing #smesector #outplacement #msme #globalworkforce #payrolling #indiapeo #indiaentry #smesurvival #peoindia #hrcloud #indiapayroll #listing Follow Husys on : Linkedin : https://www.linkedin.com/company/143536/ Facebook : https://www.facebook.com/Husys Twitter : @Husys Slide Share : https://www.slideshare.net/grhusys/ Any questions can be directed to: reach(at)husys.com Phone : +91-9948078937 (India)

1. New income tax regime vs old
What is good for you?
#getHRenabled

2. Question: New income tax regime vs old: What is good for you?
Answer: Old Income Tax Regime is better.
Comparison of new income tax regime with old tax regime: FY 19-20 (AY 20-21)
In the new budget for the fiscal year 2020-21, Finance Minister Nirmala Sitharaman introduced the
new income tax rate for taxpayers in India. The Finance minister said in her budget speech that the
Current Income Tax Act is full of various exemptions and deductions that make compliance
complicated and a burdensome process for the taxpayers.
Though the removal of tax deductions and exemptions would make the compliance less tedious, those
who have maintained their financial portfolio to avail tax deductions as per the old slab are likely to
pay more tax under the new tax slabs.
The new budget tries to curtail the option to save the incentives and puts more money in the hands
of taxpayers. However, the Individuals and Hindu Unified Families (HUF) are given an option to choose
between the old and the new tax regime.
So, coming to the old tax rates –
• Nil for the annual income up to Rs. 2.5 lakhs,
• 5% for annual income between Rs. 2.5 lakhs to Rs. 5 lakhs.
• 10% for income group between Rs. 5 lakhs and Rs. 12.5 lakhs and
• 30% for 12.5 lakhs and above.
And in the new tax regime,
• The income group between Rs. 5 lakhs and Rs. 7.5 lakhs would be required to pay income tax
at 10%.
• And the income group ranging from Rs. 7.5 lakhs to Rs. 10 lakhs will be required to pay tax at
15%.
• And the income group of Rs. 10-12.5 lakhs will be required to pay tax at 20%.
• And the income group of Rs. 12.5-15 lakhs will be required to pay tax at 25%.
It is seen that with the new tax regime is likely to make taxpayers pay a higher tax amount in the long-
term in comparison to the old regime.
And in the old tax regime, the taxpayers benefitted from several tax exemptions and deductions
including tax deductions on health insurance and ELSS investments under section 80 C and house rent
allowance, which is not possible on switching to the new system. Because the new tax policy does not
offer exemptions like the old one.
Simply put, if you are a salaried taxpayer then you will have to forgo the available deductions under
the old tax regime under chapter VI-A, such as investments under Section 80C, HRA, health insurance
premium, etc.

3. But there are no changes in the surcharge; it will remain the same as the old one:
• 10% for Rs. 50 lakhs to Rs. 1 Crore,
• 15% for Rs. 1 Crore to Rs. 2 Crores,
• 25% for Rs. 2 Crores to Rs. 5 Crores and
• 37% for over and above Rs. 5 Crores.
Let’s discuss how the new and old tax slab rates differ for each income group. And what are the
exemptions that are taken off the budget.
Tax Slabs and Rates under the New Regime
The exemption is given to people earning up to Rs. 5 lakh remains the same. Below is the table with
the old and new tax rate as applicable on the annual income:
Annual Income (Rs.) Old Tax Rate New Tax Rate
Up to Rs. 2.5 lakhs Nil Nil
Rs. 2.5 lakhs to Rs. 5 lakhs 5% 5%
Rs. 5 lakhs to Rs. 7.5 lakhs 20% 10%
Rs. 7.5 lakhs to Rs. 10 lakhs 20% 15%
Rs. 10 lakhs to Rs. 12.5 lakhs 30% 20%
Rs. 12.5 lakhs to Rs. 15 lakhs 30% 25%
Rs. 15 lakhs and above 30% 30%
Things to consider:
• The above-mentioned new rates are without any deductions under different sections of Chapter
VI-A.
• If a taxpayer claims a deduction of Rs. 2.5 lakhs (standard deduction of Rs. 50,000, Rs. 1.5 lakhs u/s
80C and investment in NPS of Rs. 50,000), the tax will remain the same as the old one.
• In case he also claims home loan interest deduction of Rs. 2 lakhs or HRA exemption, the old tax
slab rate would be Rs. 46,800 lesser than the new regime.
Here’s how the new and the old tax regime will impact the taxpayers at different income levels.

4. Individual Income Rs. 10 lakhs, living in own house so does not claim HRA and is under
60 years of age group.
Old Slabs
Old Tax Rates (in
Rs.)
New Slabs
New Tax Rates (in
Rs.)
Income 10,00,000 10,00,000
Deductions
80C 150,000 N/A
Deductions 80 D 25,000 N/A
House Loan 200,000 N/A
Standard
Deduction 50,000 N/A
Taxable
Income 5,75,000 10,00,000
Slabs
2.5-5 lakhs at
5% +5-7.5 lakhs
at 20% 12500+15000
Rs. 2.5-5 lakhs at 5%
+Rs. 5-7.5 lakhs at
10%+ Rs. 7.5-10
lakhs 12500+25000+37,500
Total tax
payable as per
the income tax
slab 27,500 75,000

5. Now let’s see how the income group above Rs. 15 lakhs will be charged in the old regime and the new
regime. This is a separate calculation from the above table:
Income: Rs. 15 lakhs
Old Regime
with
Deductions (in
Rs.)
Old Regime without
Deductions (in Rs.)
New Regime (in
Rs.)
Income 15 lakhs 15 lakhs 15 lakhs
Exemptions/Deductions
2 lakhs (Rs. 1.5
lakhs u/s 80C +
Rs. 50,000
standard
deduction) Nil Nil
Taxable Income 13 lakhs 15 lakhs 15 lakhs
Total Tax 202500 262,500 187500
Income: Rs. 30 lakhs
Old Tax Rate
with
Deductions (in
Rs.)
Old Tax Rate
without Deductions
(in Rs.)
New Regime (in
Rs.)
Income 30 lakhs 30 lakhs 30 lakhs
Exemptions/Deductions
425000 Nil Nil
Taxable Income 25,75,000 30,00,000 30,00,000
Total Tax 585000 712,500 637500
The above payable tax would include Cess @ 4% extra. The above calculation is for reference purpose
only.
* Deductions Applicable: Rs 1.5 lakhs u/s 80C; Rs. 50,000 standard deduction; Rs. 25,000 u/s 80D; Rs.
2 lakhs home loan interest u/s 24.

6. Income: Rs. 60 lakhs
Old Tax Rate
with
Deductions (in
Rs.)
Old Tax Rate
without Deductions
(in Rs.)
New Regime (in
Rs.)
Income 60 lakhs 60 lakhs 60 lakhs
Exemptions/Deductions
425000 Nil Nil
Taxable Income 55,75,000 60,00,000 60,00,000
Surcharge @ 10% 1,48,500 161,250 1,53,750
Total Tax 16,33,500 17,73,750 16.91,250
* Deductions Applicable: Rs 1.5 lakhs u/s 80C; Rs. 50,000 standard deduction; Rs. 25,000 u/s 80D; Rs.
2 lakhs home loan interest u/s 24.
Exemptions and Deductions
Here is the difference between the exemptions and deductions between the old tax regime and the
new tax regime:

7. Old Tax Regime New Tax Regime
➢ Allows the following
exemptions:
➢ Standard deduction
➢ House rent allowance
➢ Section 80C investments
➢ Housing loan interest
➢ Medical insurance premium
➢ Education loan interest
Leave travel allowance
➢ Savings bank interest
➢ Takes off the 70 exemptions that were permitted
under the following:
➢ Education loan interest
➢ Section 80C investments
➢ Housing loan interest
➢ House rent allowance
➢ Leave travel allowance
➢ Standard deduction
➢ Medical insurance premium
➢ Savings bank interest
Only 50 tax exemptions are permissible:
➢ Standard deduction on rent
➢ VRS proceeds
➢ Agricultural income
➢ Retrenchment compensation
➢ Income from life insurance
➢ Leave encashment on retirement
➢ Deductions allowed under
the old tax regime:
➢ Deduction under section
80C, 80CCC, 80CCD
➢ 80G, 80GG, 80GGA, 80GGC
➢ 80E, 80EE, 80EEA, 80EEB
➢ Deduction under section
80D, 80DD, 80DDB
➢ 80IA, 80-IAB, 80-IAC, 80-IB,
80-IB
• These deductions won’t be entertained under the new
tax regime.
So, you will not gain from the new regime if you the tax exemptions & deductions that you are
claiming in a year more than Rs. 2.5 lakhs that applies to income group above Rs.15 lakhs. If your NPS
contribution/HRA exemption/ housing loan interest claims are more than Rs. 50,000 then sticking to
the old regime would be beneficial for you. Basically, the higher the investments, and exemptions
apart from the standard deduction, the better it is to stick to the old tax regime.
However, as per the financial minister, a taxpayer with an annual income of Rs. 15 lakhs can save Rs.
78,000 under the new tax regime. But if you are the saving kind then do stick to the old tax regime.

8. Making the choice
In light of the above and considering the new personal tax regime wherein certain deductions and
exemptions would not be applicable in case of taxpayers opting for concessional new tax regime, the
taxpayers may evaluate both the regimes. Any taxpayer who is looking for flexibility in the investment
choices and does not want to invest in the specified eligible instruments, may consider opting for the
new tax regime. However, it is advisable to do a comparison.
It is notable that, the choice can be exercised every year and any regime which is beneficial can be
adopted by the individual (except for those who have income from business or profession). Individuals
who have income from business or profession cannot switch between the new and old tax regimes
every year. If they opt for the new taxation regime, such individuals get only one chance in their
lifetime to go back to the old regime. Further, once switched back to existing tax regime, they will not
be able opt for new tax regime unless their business income ceases to exist.
Takeaway
Theoretically, the new tax regime might be offering lower tax rates and lesser complications but taking
into consideration the overall tax benefits that one can avail under the available exemptions and
deductions, the new tax regime doesn’t seem to promise as one would end up paying a higher tax
amount. Well, the choice remains subjective here.
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